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Google dodges bullet as FTC closes probe

Federal regulators on Thursday concluded a nearly two-year probe of Google with what amounts to a slap on the wrist: an agreement to restrict its use of smartphone patents and a voluntary change in how the most dominant search engine on the Web behaves and handles advertisements.

It was Google’s largest challenge to date from Washington and the company dodged a potentially lengthy and costly antitrust trial by agreeing to a modest set of changes. The case also illustrated just how much more savvy major technology companies have become over the past decade in navigating how they work the regulatory and lobbying lanes in Washington, as Google spent millions in lobbying and two years working the case.

Google averted what could have been a much harsher penalty from the Federal Trade Commission: antitrust charges that it illegally wielded monopoly power in online search to thwart rivals, the sort of resolution that had been advanced vigorously by its opponents.

“I've been doing this almost 40 years, and I've done dozens if not scores of government investigations on both sides, and I have never seen a more unprofessional, incomplete, incompetent investigation,” said Gary Reback, a Silicon Valley lawyer who represented some of Google’s complainants before the FTC.

The FTC voted on a bipartisan basis in favor of the two settlements, FTC Chairman Jon Leibowitz announced. Regarding a consent decree requiring Google through its Motorola Mobility subsidiary to stop using standards essential patents to block rival products, the commission voted 4-1. In addition, the FTC voted 5-0 to close an investigation into Google’s search business, “finding the evidence does not support the claim,” Leibowitz said. “But we do accept Google’s legally binding and enforceability commitments related to search and advertising.”

The larger investigation into Google’s search and advertising businesses, however, was settled by the FTC by something of a handshake agreement. The company committed in a letter that it would cease borrowing others' content — like restaurant reviews — for use in its own products. Google also promised to allow its advertising customers to port their keyword campaigns easily over to rivals.

The settlement grants the FTC a direct avenue to pursue fines and other penalties against Google if it wields its standards patents too aggressively. It’s an approach, though, that still might not assuage critics: Two of the foes Google has fought in patent court battles — Microsoft and Apple — wrote letters to the FTC this week saying the deal was too lenient and that no deal would be better than this, sources told POLITICO.

But the FTC did not force Google to change its key search business — and so consumers are unlikely to see a major difference in their search results.

The real losers are companies such as Microsoft, Expedia, Nextag and others that had complained Google was manipulating search results to promote its own ancillary products — in shopping, travel and other sectors — to the top rankings.